![]() The additional $37,000 will not be taxed. Say you currently have an employee whose yearly salary is $180,000.įor Social Security, you and your employee are only liable for $8,853.60, 6.2% of $142,800. So let’s spell it out with a payroll tax calculation example: Past a certain wage base – which can change each year – you and the employee do not have to pay the percentage past a certain amount. ![]() However, there is an important distinction to note when determining how to figure out employee taxes. ![]() Social Security tax draws 6.2% of the employee’s wages as well as a matching 6.2% from you, the employer. Social Security tax takes up the bulk of the tax percentage you and your employee will contribute to FICA. The employee will pay 7.65% from their salary while you, the employer, will pay a matching 7.65% of their salary as well. FICA taxįICA is the federal payroll tax paid by the employee and employer that contributes to Medicare and Social Security. Keep in mind that these are all payroll taxes, but payroll tax calculation methods and percentages vary according to each tax within them. Once you determine the gross taxable income, you determine the amount for FICA (Medicare and Social Security), FUTA, and state/local payroll taxes. However, this won’t include non-taxable income or pre-tax deductions, such as expense reimbursements or health insurance deductions. Gross taxable wages include the cumulative salaries, wages, and tips. Payroll FICA and FUTA taxes are calculated from an employee’s gross taxable wages. If that sounds basic, we know that, as with most things, how to pay payroll taxes is easier said than done, so let’s get into the details of each step. ![]() Report tax to federal and other relevant agencies. How to calculate payroll taxes, how to pay payroll taxes, and how to avoid an unfortunate run-in with the IRS.ġ. How to pay payroll taxes for your employees This amount will be determined by an employee’s W-4 form, and you will submit it to the IRS. However, as the employer, you’re the one withholding it each paycheck. Employees are solely responsible for paying it. Withholdings, on the other hand, are an employee’s income tax. In other words, half will be paid by you as the employer, and the other half will be paid by the employee. Payroll FICA taxes are employee and employer-paid taxes. It’s important to note that when beginning to figure out employees’ taxes, paycheck withholdings are different than the money you deduct from employees for payroll tax. Whenever you find yourself asking, “how do I pay taxes for my employees,” you’ll be dealing with tax withholdings. These payroll taxes refer to FICA ( Federal Insurance Contributions Act), which funds Medicare and Social Security and is contributed to by employees and employers, as well as FUTA ( Federal Unemployment Tax Act), which funds unemployment benefits and is only paid by the employer.įor more on these acts, check out our Payroll Compliance 101 guide. They are employee and employer-paid taxes, meaning both you and your employee contribute to them.Īs an employer, you might ask yourself, how do I pay taxes for my employees?Īfter all, it’s your responsibility to calculate that amount and withhold the employee contribution from their paycheck. Payroll taxes are taxes employers pay per employee determined from an employee’s wage, salary, and tips. Before we even start on how to calculate payroll taxes, let’s do a short recap.
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